updated 4/28/2011 7:16:32 AM ET 2011-04-28T11:16:32

CHARLOTTESVILLE, Va., April 28, 2011 (GLOBE NEWSWIRE) -- StellarOne Corporation (Nasdaq:STEL) ("StellarOne") today reported first quarter 2011 earnings of $2.9 million and net income available to common shareholders, which deducts from net income the dividends and discount accretion on preferred stock, of $2.4 million, or $0.11 net income per diluted common share. Those results compare to net income available to common shareholders of $1.4 million, or $0.06 net income per diluted common share during the same quarter in the prior year, and net income to common shareholders of $2.4 million, or $0.10 net income per diluted common share for the fourth quarter of 2010. Continued asset quality improvement resulting in lower loan loss provision levels, along with decreasing foreclosed assets and mortgage indemnification losses, contributed to the growth in recurring earnings.

"We are off to a positive start for 2011, and pleased to see continued improvement in our credit quality and earnings results. Asset quality metrics were improved in virtually every phase, allowing for some reduced loss provisioning. We had some respectable recurring revenue growth year over year from net interest margin expansion, but did experience reduced mortgage revenues, retail banking revenues and balance sheet contraction. Loan growth continues to be a challenge, but activity in the commercial segment appears to be improving. Increasing our lending activity is a high priority for us right now. We have added some seasoned lenders in the Richmond market that are beginning to have an impact," said O. R. Barham, Jr., President and Chief Executive Officer.

First quarter 2011 notable highlights include:

  • Non-performing asset levels decreased $2.2 million on a sequential basis, lowering the ratio of non-performing assets as a percentage of total assets to 1.80% as of March 31, 2011, compared to 1.85% as of December 31, 2010.
     
  • Net charge-offs as a percentage of average loans outstanding were 0.88% for the first quarter of 2011, down compared to 1.43% for the fourth quarter of 2010.  
     
  • Noninterest income on an operating basis increased 7.9% sequentially due to lower write-downs of foreclosed assets, lower losses from mortgage indemnifications and an increase in wealth management revenues.  
     
  • Net interest income on a tax-equivalent basis decreased $847 thousand or 3.3% for the quarter on a lower earning asset base, as the net interest margin remained relatively stable, dropping two basis points on a sequential quarter basis.   
     
  • Pre-tax, pre-provision earnings amounted to $8.0 million for the first quarter of 2011, a decrease of $634 thousand or 7.3% compared to the fourth quarter of 2010, and a decrease of $769 thousand or 8.8% when compared to the same period in the prior year.  This decrease relates to nonrecurring revenue items being realized in both prior year periods compared to minimal nonrecurring items in the current period.

Net Interest Margin Remains Stable Sequentially

Net interest income on a tax-equivalent basis amounted to $24.6 million for the first quarter of 2011, which compares to $25.4 million for the fourth quarter of 2010, and $23.1 million for the same period in the prior year. The net interest margin was 3.85% for the first quarter of 2011, compared to 3.87% for the fourth quarter of 2010 and 3.52% for the first quarter of 2010. The average yield on earning assets for the current quarter decreased 8 basis points to 4.85% as compared to 4.93% for the fourth quarter of 2010, which was offset by a 6 basis point improvement in the cost of interest bearing liabilities, moving from 1.26% during the fourth quarter of 2010 to 1.20% during the first quarter of 2011. The re-pricing sensitivity of interest earning assets outpaced interest bearing liabilities during the first quarter as loan yields contracted 9 basis points sequentially due to repricing within the current portfolio and lower yields realized on new production due to the protracted, exceptionally low rate environment. The cost of FHLB advances and subordinated debt both increased 4 basis points sequentially. This was offset by decreases of 7 basis points and 12 basis points for time deposits less than $100 thousand and greater than $100 thousand, respectively, which contributed to the 6 basis point improvement to the cost of funds. 

Operating Noninterest Income Increases Sequentially

On an operating basis, which excludes gains and losses from sales and impairments of securities and other assets, total non-interest income amounted to $7.7 million for the first quarter of 2011, or up $559 thousand or 7.9% on a sequential basis compared to $7.1 million for the fourth quarter of 2010, and essentially flat compared to the same period in prior year. The sequential quarter increase on a consolidated basis is largely attributable to a $589 thousand decrease in losses on mortgage indemnifications, a $560 thousand decrease in losses on foreclosed assets and a $182 thousand increase in wealth management revenues which were offset by a $577 thousand decrease in mortgage banking fees and a $343 thousand contraction in retail banking fees. While operating noninterest income remained flat compared to the same quarter in the prior year, retail banking fees contracted $364 thousand and were offset by increases of $146 thousand in wealth management revenues, $104 thousand in increased insurance revenues included in other operating income and $71 thousand in mortgage banking fees.

Mortgage banking revenue totaled $2.1 million for the first quarter of 2011, or down $577 thousand or 20.7% compared to $2.8 million for the fourth quarter of 2010 and up $71 thousand or 3.6% when compared to the same quarter in 2010. This sequential quarter revenue decrease was associated with higher mortgage rates resulting in reduced refinance activity. Indemnification expense totaled $265 thousand for the quarter, down $589 thousand or 69.0% compared to the $854 thousand in the fourth quarter of 2010 and up $132 thousand or 99.3% compared to $133 thousand for the same quarter in 2010.

Retail banking fee income amounted to $3.6 million for the first quarter of 2011, a decrease of $343 thousand or 8.8% compared to $3.9 million for the fourth quarter of 2010. This sequential quarter decrease was attributable to a decrease of $282 thousand and $36 thousand in consumer NSF and commercial NSF income, respectively, while interchange fee income remained flat on a sequential quarter basis. 

Wealth management revenues from trust and brokerage fees for the first quarter of 2011 were $1.3 million or up $182 thousand or 15.7% and $146 thousand or 12.2% when compared to $1.2 million realized during both the fourth and first quarters of 2010, respectively. Higher fee realizations attributed to the revenue increase. Fiduciary assets decreased $23.1 million sequentially to $466.6 million, compared to $489.7 million at December 31, 2010, with much of the decrease associated with market valuation declines in the first quarter. 

Non-performing Asset Levels Continue To Decline

StellarOne's non-performing assets totaled $52.2 million at March 31, 2011, down $2.2 million or 4.0% from $54.4 million at December 31, 2010 and down $9.8 million or 15.8% compared to $62.0 million at March 31, 2010. The ratio of non-performing assets as a percentage of total assets decreased sequentially to 1.80% as of March 31, 2011, compared to 1.85% at December 31, 2010 and 2.07% at March 31, 2010. Non-performing loans totaled $43.2 million at March 31, 2011, essentially flat when compared to $43.0 million at December 31, 2010 and down $16.6 million or 27.8% compared to $59.8 million at March 31, 2010. Foreclosed assets totaled $9.0 million, down $1.9 million or 17.4% compared to $10.9 million at December 31, 2010 and up $6.8 million or greater than 100% compared to March 31, 2010. Past due and matured loans between 30 and 89 days totaled $41.8 million at March 31, 2011, down $11 million or 20.8% compared to $52.8 million at December 31, 2010.

Annualized net charge-offs as a percentage of average loans receivable amounted to 0.88% for the first quarter of 2011, down compared to 1.43% for the fourth quarter 2010 results and down from 1.13% for the first quarter of 2010.  Net charge-offs for the first quarter of 2011 totaled $4.6 million or down $3.0 million compared to the $7.6 million realized during the fourth quarter of 2010 and down $1.6 million when compared to $6.2 million during the first quarter of 2010.

The mix of non-performing loans continues to be weighted to the construction and land development loan segment of our portfolio. Of the total nonaccrual loans of $43.2 million at March 31, 2011, approximately $16.4 million are residential development and construction loans.

StellarOne recorded a provision for loan losses of $4.5 million for the first quarter of 2011, a decrease of $0.8 million compared to the fourth quarter of 2010 and a decrease of $2.2 million compared to the first quarter of 2010. The first quarter 2011 provision compares to net charge-offs of $4.6 million, resulting in an allowance as a percentage of total loans of 1.82% or up three basis points when compared to 1.79% as of December 31, 2010.  Specific reserves within the allowance dropped $557 thousand from the fourth quarter 2010 to the first quarter due to the resolution of problem loans and related charge-offs taken during the current quarter. This coupled with the loan contraction noted during the period resulted in an increase to the allowance as a percentage of total loans and a slight decrease to the coverage of non-performing loans. The allowance represents 86.9% of non-performing loans at March 31, 2011, or down .70% when compared to 87.6% at December 31, 2010.

Efficiency Ratio Decreases Sequentially

StellarOne's efficiency ratio was 71.4% for the first quarter of 2011, compared to 71.5% for the fourth quarter of 2010 and 71.2% for the same quarter in 2010. The sequential quarter stability in the efficiency ratio reflects a slight decrease in both noninterest expense and total revenue. Non-interest expense for the first quarter amounted to $23.5 million, or down $420 thousand or 1.8% when compared to $24.0 million for the fourth quarter of 2010 and up $989 thousand or 4.4% when compared to the first quarter in 2010. The sequential quarter decrease was driven by decreases of $593 thousand in FDIC insurance expense and $422 thousand in other operating expenses, which were offset by a $552 thousand increase in compensation and employee benefits. The decrease in FDIC insurance expense is expected to continue going forward, while the decrease in other expenses is related to the lower mortgage volume and will be dependent on future volume.  The increase in compensation and benefits is related to incentive expense that is linked to performance goal attainments in the quarter. 

Capital Levels Remain Robust After Partial TARP Repayment

StellarOne's risk-based capital ratios remain well above regulatory standards for well-capitalized banks. The period-end tangible common equity ratio was 10.08% at March 31, 2011 compared to 9.79% at December 31, 2010. Tier 1 risk-based and total risk-based capital ratios were 14.88% and 16.14%, respectively, at March 31, 2011 compared to 14.19% and 15.44% at December 31, 2010. Excluding the $30 million in preferred stock issued in connection with participation in the TARP program, StellarOne's Tier 1 risk-based capital ratio was 13.56% compared to 12.83% at December 31, 2010. Shareholders' equity, excluding the preferred stock, represented 14.0% of total assets at March 31, 2011, while book value per common share was $17.51 per share. Subsequent to quarter end, on April 13, 2011 the Company redeemed 25% or 7,500 shares of its Fixed Rate Cumulative Perpetual Preferred Stock outstanding with the U.S. Department of the Treasury. Excluding the 7,500 shares of Fixed Rate Cumulative Perpetual Preferred Stock redeemed shortly after period end, the period-end tangible common equity ratio, tier 1 risk-based and total risk-based capital ratios would have been 9.81%, 14.55% and 15.80%, respectively, at March 31 2011.

Loan and Balance Sheet Experience Some Modest Contraction

Period end loans decreased $34.2 million as compared to the fourth quarter 2010, while average loans for the first quarter of 2011 were $2.10 billion, or down approximately 1.4% when compared to $2.13 billion for the fourth quarter of 2010. Average securities were $359.0 million for the first quarter, down $8.1 million or 2.2% from $367.1 million for the fourth quarter of 2010. Average deposits for the first quarter of 2011 were $2.36 billion or essentially flat on a sequential quarter basis. Average interest bearing deposits increased sequentially by approximately $8.1 million, while average non-interest bearing deposits decreased approximately $11.9 million. At March 31, 2011, total assets were $2.90 billion, compared to $2.94 billion at December 31, 2010. Cash and cash equivalents were $178.4 million at March 31, 2011, an increase of $38.5 million or 27.5% compared to $139.9 million at December 31, 2010.

About StellarOne

StellarOne Corporation is a traditional community bank, offering a full range of business and consumer banking services, including trust and wealth management services. Through the activities of its sole subsidiary, StellarOne Bank, StellarOne operates 56 full-service financial centers, one loan production office, and a suite of ATMs serving the New River Valley, Roanoke Valley, Shenandoah Valley, and Central and North Central Virginia.

Earnings Webcast

To hear a live webcast of StellarOne's first quarter 2011 earnings conference call at 10:00 a.m. (EDT) today, please visit our website at www.StellarOne.com and click on the Investor Relations section for detailed instructions on how to participate. Replays of the conference call will be available from 1:00 p.m. (EDT) on Thursday, April 28, 2011 through 11:59 PM (EDT) on Friday, May 6, 2011, by dialing toll free (800) 642-1687 and using passcode #57691445.

Non-GAAP Financial Measures

This report refers to the efficiency ratio, which is computed by dividing non-interest expense less amortization of intangibles, foreclosed property expense and goodwill impairments as a percent of the sum of net interest income on a tax equivalent basis and non-interest income excluding only gains on securities. Comparison of our efficiency ratio or operating earnings with those of other companies may not be possible because other companies may calculate them differently. It also refers to operating earnings, which reflects net income adjusted for non-recurring expenses associated with mergers, asset gains and losses or expenses that are unusual in nature. Pre-tax, pre-provision earnings, which adds back provision and tax expense to net income, is used to demonstrate a more representative comparison of operational performance without the volatility of credit quality that is typically present in times of economic stress. The tangible common equity and Tier 1 common equity ratios are used by management to assess the quality of capital and management believes that investors may find them useful in their analysis of the company. These capital measures are not necessarily comparable to similar capital measures that may be presented by other companies. Such information is not in accordance with generally accepted accounting principles in the United States ("GAAP") and should not be construed as such. These are non-GAAP financial measures that we believe provide investors with important information regarding our operational efficiency. Management believes such financial information is meaningful to the reader in understanding operating performance, but cautions that such information should not be viewed as a substitute for GAAP. StellarOne, in referring to its net income, is referring to income under GAAP.

Forward-Looking Statements

In addition to historical information, this press release contains forward-looking statements. The forward-looking statements are subject to certain risks and uncertainties, which could cause actual results to differ materially from historical results, or those anticipated. When we use words such as "believes," "expects," "anticipates" or similar expressions, we are making forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date thereof. StellarOne wishes to caution the reader that factors, such as those listed below, in some cases have affected and could affect StellarOne's actual results, causing actual results to differ materially from those in any forward-looking statement. These factors include: (i) expected cost savings from StellarOne's acquisitions and dispositions, (ii) competitive pressure in the banking industry or in StellarOne's markets may increase significantly, (iii) changes in the interest rate environment may reduce margins, (iv) general economic conditions, either nationally or regionally, may be less favorable than expected, resulting in, among other things, credit quality deterioration, (v) changes may occur in banking legislation and regulation, (vi) changes may occur in general business conditions, (vii) changes may occur in the securities markets, and (viii) the impact of governmental restrictions on entities participating in the US Treasury Department Capital Purchase Program. Please refer to StellarOne's filings with the Securities and Exchange Commission for additional information, which may be accessed at www.StellarOne.com.

NOTE: Risk-based capital ratios are preliminary.

SELECTED FINANCIAL DATA (UNAUDITED)
STELLARONE CORPORATION (NASDAQ: STEL)
(Dollars in thousands, except per share data)
     
     
SUMMARY INCOME STATEMENT Three Months Ended March 31,
  2011 2010
Interest income - taxable equivalent  $ 31,019  $ 33,096
Interest expense  6,443  9,982
Net interest income - taxable equivalent  24,576  23,114
Less: taxable equivalent adjustment  713  615
Net interest income  23,863  22,499
Provision for loan and lease losses  4,500  6,700
Net interest income after provision for loan and lease losses  19,363  15,799
Noninterest income  7,670  8,814
Noninterest expense  23,536  22,547
Income tax expense  626  212
Net income  2,871  1,854
Dividends and accretion on preferred stock  (370)  (370)
Accretion of preferred stock discount  (95)  (88)
Net income available to common shareholders  $ 2,406  $ 1,396
     
Earnings per share available to common shareholders    
Basic  $ 0.11  $ 0.06
Diluted  $ 0.11  $ 0.06
     
SUMMARY AVERAGE BALANCE SHEET Three Months Ended March 31,
  2011 2010
Total loans  $ 2,104,031  $ 2,204,297
Total securities  359,027  365,556
Total earning assets  2,591,490  2,666,861
Total assets  2,910,242  2,998,983
Total deposits  2,358,546  2,402,716
Shareholders' equity  427,732  422,260
     
PERFORMANCE RATIOS Three Months Ended March 31,
  2011 2010
Return on average assets 0.40% 0.25%
Return on average equity 2.72% 1.78%
Return on average realized equity (A) 2.75% 1.78%
Net interest margin (taxable equivalent) 3.85% 3.52%
Efficiency (taxable equivalent) (B) 71.44% 71.15%
     
CAPITAL MANAGEMENT March 31,
  2011 2010
     
Tier 1 risk-based capital ratio 14.88% 13.67%
Tangible equity ratio 11.12% 10.45%
Tangible common equity ratio 10.08% 9.40%
Period end shares issued and outstanding  22,775,733  22,684,816
Book value per common share  17.51  17.30
Tangible book value per common share  12.25  11.94
     
  Three Months Ended March 31,
  2011 2010
Shares issued  27,671  23,691
Average common shares issued and outstanding  22,764,099  22,674,490
Average diluted common shares issued and outstanding  22,833,417  22,729,666
Cash dividends paid per common share  $ 0.04  $ 0.04
     
SUMMARY ENDING BALANCE SHEET March 31,
  2011 2010
Total loans  $ 2,064,732  $ 2,161,084
Total securities  380,078  380,268
Total earning assets  2,595,852  2,698,327
Total assets  2,898,396  3,002,617
Total deposits  2,364,564  2,409,088
Shareholders' equity  428,869  422,492
     
OTHER DATA    
End of period full time equivalent employees 833 818
     
NOTES:     
(A) Excludes the effect on average stockholders' equity of unrealized gains (losses) that result from changes in market values of securities and other comprehensive pension expense.
(B) Computed by dividing non-interest expense less amortization of intangibles, foreclosed asset expense and goodwill impairments by the sum of net interest income on a fully tax equivalent basis and non-interest income excluding only gains on securities. This is a non-GAAP financial measure, which we believe provides investors with important information regarding our operational efficiency. Comparison of our efficiency ratio with those of other companies may not be possible, because other companies may calculate the efficiency ratio differently.
(C) Individual amounts shown above are calculated from actual, not rounded amounts in the thousands, which appear above.
       
QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)  
STELLARONE CORPORATION (NASDAQ: STEL)  
(Dollars in thousands)
       
       
CREDIT QUALITY Three Months Ended March 31,  
  2011 2010  
Allowance for loan losses:      
Beginning of period  $ 37,649  $ 40,172  
Provision for loan losses  4,500  6,700  
Charge-offs  (4,978)  (6,708)  
Recoveries  348  480  
Net charge-offs  (4,630)  (6,228)  
       
End of period  $ 37,519  $ 40,644  
       
Accruing Troubled Debt Restructurings  $ 41,335  $ 23,032  
       
Loans greater than 90 days past due still accruing  $ 148  $ 885  
       
  March 31,  
  2011 2010  
Non accrual loans  $ 39,096  $ 57,951  
Non accrual TDR's  4,078  1,810  
Total non-performing loans  43,174  59,761  
Foreclosed assets  9,036  2,267  
Total non-performing assets  $ 52,210  $ 62,028  
Nonperforming assets as a % of total assets 1.80% 2.07%  
Nonperforming assets as a % of loans plus foreclosed assets 2.52% 2.87%  
Allowance for loan losses as a % of total loans 1.82% 1.88%  
Net charge-offs as a % of average loans outstanding 0.88% 1.13%  
       
       
  March 31, 2011
  Loans Outstanding Nonaccrual Loans Nonaccrual Loans to

Loans Outstanding
Construction and land development  233,514  16,368 7.01%
Commercial real estate:      
 Commercial real estate  733,672  7,280 0.99%
 Farmland  17,651  1,816 10.29%
 Multifamily, nonresidential and junior liens  103,956  120 0.12%
 Total commercial real estate  855,279  9,216 1.08%
Consumer real estate:      
 Home equity lines  266,025  3,501 1.32%
 Secured by 1-4 family residential, secured by first deeds of trust  456,286  10,172 2.23%
 Secured by 1-4 family residential, secured by second deeds of trust  44,478  1,088 2.45%
 Total consumer real estate  766,789  14,761 1.93%
Commercial and industrial loans (except those secured by real estate)  181,650  2,809 1.55%
Consumer and other:      
 Consumer installment loans  24,809  --  0.00%
 Deposit overdrafts  1,008  --  0.00%
 All other loans   1,684  20 1.19%
 Total consumer and other  27,501  20 0.07%
Total loans  2,064,732  43,174 2.09%
       
QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (NASDAQ: STEL)
(Dollars in thousands, except per share data)
       
       
      Percent
      Increase
SELECTED BALANCE SHEET DATA 3/31/2011 3/31/2010 (Decrease)
       
Assets      
Cash and cash equivalents  $ 178,422  $ 165,420 7.86%
       
Securities:      
Securities available for sale  380,078  379,842 0.06%
Securities held to maturity  --   426 -100.00%
Total securities  380,078  380,268 -0.05%
       
Mortgage loans held for sale  12,047  29,355 -58.96%
       
Loans:      
Construction and land development  233,514  265,700 -12.11%
Commercial real estate  855,279  858,644 -0.39%
Consumer real estate  766,789  784,586 -2.27%
Commercial and industrial loans (except those secured by real estate)  181,650  216,316 -16.03%
Consumer and other  27,501  35,838 -23.26%
Total loans  2,064,732  2,161,084 -4.46%
Deferred loan costs  596  911 -34.58%
Allowance for loan losses  (37,519)  (40,644) -7.69%
Net loans  2,027,809  2,121,351 -4.41%
       
Premises and equipment, net  77,893  81,242 -4.12%
Core deposit intangibles, net  6,249  7,900 -20.90%
Goodwill  113,652  113,652 0.00%
Bank owned life insurance  31,435  30,519 3.00%
Foreclosed assets  9,036  2,267 298.59%
Other assets  61,775  70,643 -12.55%
       
Total assets  2,898,396  3,002,617 -3.47%
       
Liabilities      
Deposits:      
Noninterest bearing deposits  307,847  298,682 3.07%
Money market & interest checking  981,617  969,425 1.26%
Savings  275,751  207,266 33.04%
CD's and other time deposits  799,349  933,715 -14.39%
 Total deposits  2,364,564  2,409,088 -1.85%
       
Federal funds purchased and securities sold under agreements to repurchase  1,156  952 21.43%
Federal Home Loan Bank advances  60,000  125,000 -52.00%
Subordinated debt  32,991  32,991 0.00%
Other liabilities  10,816  12,094 -10.57%
       
Total liabilities  2,469,527  2,580,125 -4.29%
       
Stockholders' equity      
Preferred stock  28,858  28,486 1.31%
Common stock  22,776  22,685 0.40%
Additional paid-in capital  270,396  269,241 0.43%
Retained earnings  102,677  97,431 5.38%
Accumulated other comprehensive income, net  4,162  4,649 -10.48%
       
Total stockholders' equity  428,869  422,492 1.51%
       
Total liabilities and stockholders' equity  $ 2,898,396  $ 3,002,617 -3.47%
       
QUARTERLY PERFORMANCE SUMMARY (UNAUDITED)
STELLARONE CORPORATION (NASDAQ: STEL)
(Dollars in thousands)
      Percent
  For the Three Months Ended Increase
  3/31/2011 3/31/2010 (Decrease)
Interest Income      
Loans, including fees  $ 27,264  $ 29,086 -6.26%
Federal funds sold and deposits in other banks  68  61 11.48%
Investment securities:      
Taxable  1,721  2,258 -23.78%
Tax-exempt  1,253  1,047 19.68%
Dividends   --   29 -100.00%
Total interest income  30,306  32,481 -6.70%
       
Interest Expense      
Deposits  5,533  8,609 -35.73%
Federal funds purchased and securities sold under agreements to repurchase  8  6 33.33%
Federal Home Loan Bank advances and other borrowings  640  1,110 -42.34%
Subordinated debt  262  257 1.95%
       
Total interest expense  6,443  9,982 -35.45%
       
Net interest income  23,863  22,499 6.06%
Provision for loan losses  4,500  6,700 -32.84%
Net interest income after provision for loan losses  19,363  15,799 22.56%
       
Noninterest Income      
Retail banking fees  3,556  3,920 -9.29%
Commissions and fees from fiduciary activities  904  834 8.39%
Brokerage fee income  435  359 21.17%
Mortgage banking-related fees  2,065  1,994 3.56%
Gain on sale of financial center  --   748 -100.00%
Losses on mortgage indemnifications and repurchases  (265)  (133) 99.25%
Gains on sale of premises and equipment  --   27 >100%
Gains on securities available for sale  10  302 >100%
Losses / impairments on foreclosed assets  (128)  (231) -44.59%
Income from bank owned life insurance  319  324 -1.54%
Other operating income  774  670 15.52%
Total noninterest income  7,670  8,814 -12.98%
       
Noninterest Expense      
Compensation and employee benefits  12,355  11,310 9.24%
Net occupancy   2,073  2,179 -4.86%
Supplies and equipment   2,207  2,178 1.33%
Amortization-intangible assets  413  413 0.00%
Marketing  327  153 113.73%
State franchise taxes  598  554 7.94%
FDIC insurance   877  1,109 -20.92%
Data processing  636  543 17.13%
Professional fees  633  675 -6.22%
Telecommunications  376  425 -11.53%
Other operating expenses  3,041  3,008 1.10%
Total noninterest expense  23,536  22,547 4.39%
       
Income before income taxes  3,497  2,066 69.26%
Income tax expense  626  212 >100%
Net income  $ 2,871  $ 1,854 54.85%
             
STELLARONE CORPORATION (NASDAQ: STEL)
CONSOLIDATED AVERAGE BALANCES, YIELDS AND RATES (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2011 AND 2010
(Dollars in thousands)
             
             
  For the Three Months Ended March 31,
  2011 2010
  Average Interest  Average Average Interest  Average
Dollars in thousands Balance Inc/Exp Rates Balance Inc/Exp Rates
             
Assets            
Loans receivable, net (1)  $ 2,104,031  $ 27,302 5.26%  $ 2,204,297  $ 29,136 5.36%
Investment securities            
Taxable  229,709  1,721 3.00%  259,875  2,288 3.52%
Tax exempt (1)  129,318  1,928 5.96%  105,681  1,611 6.10%
Total investments  359,027  3,649 4.07%  365,556  3,899 4.27%
             
Interest bearing deposits  77,042  36 0.19%  44,060  28 0.25%
Federal funds sold  51,390  32 0.25%  52,948  33 0.25%
   487,459  3,717 3.05%  462,564  3,960 3.43%
             
Total earning assets  2,591,490  $ 31,019 4.85%  2,666,861  $ 33,096 5.04%
             
Total nonearning assets  318,752      332,122    
             
Total assets  $ 2,910,242      $ 2,998,983    
             
Liabilities and Stockholders' Equity            
Interest-bearing deposits            
 Interest checking  $ 559,393  $ 533 0.39%  $ 558,797  $ 1,332 0.97%
 Money market  420,202  1,041 1.00%  392,243  1,294 1.34%
 Savings  268,854  468 0.71%  200,064  450 0.91%
 Time deposits:            
 Less than $100,000  542,760  2,243 1.68%  643,709  3,577 2.25%
 $100,000 and more  264,169  1,248 1.92%  312,297  1,956 2.54%
Total interest-bearing deposits  2,055,378  5,533 1.09%  2,107,110  8,609 1.66%
             
Federal funds purchased and securities sold under agreements to repurchase  1,044  8 3.07%  861  6 2.79%
Federal Home Loan Bank advances and other borrowings  80,000  640 3.20%  127,167  1,110 3.49%
Subordinated debt  32,991  262 3.18%  32,991  257 3.12%
             
   114,035  910 3.19%  161,019  1,373 3.41%
             
 Total interest-bearing liabilities  2,169,413  6,443 1.20%  2,268,129  9,982 1.78%
             
 Total noninterest-bearing liabilities  313,097      308,594    
             
Total liabilities  2,482,510      2,576,723    
Stockholders' equity  427,732      422,260    
             
Total liabilities and stockholders' equity  $ 2,910,242      $ 2,998,983    
             
             
Net interest income (tax equivalent)    $ 24,576      $ 23,114  
 Average interest rate spread     3.65%     3.26%
 Interest expense as percentage of average earning assets     1.01%     1.52%
 Net interest margin     3.85%     3.52%
             
(1) Income and yields are reported on a taxable equivalent basis using a 35% tax rate.
         
STELLARONE CORPORATION (NASDAQ: STEL)
FINANCIAL INFORMATION - FOUR QUARTER TREND (UNAUDITED)
(Dollars in thousands, except per share data)
         
  2011 2010
  Quarter Ended
  March 31, December 31, September 30, June 30,
         
Interest income  $ 30,306  $ 31,710  $ 31,582  $ 32,150
Interest expense  6,443  6,950  8,048  8,932
 Net interest income  23,863  24,760  23,534  23,218
Provision for loan losses  4,500  5,300  3,500  7,350
 Total net interest income after provision  19,363  19,460  20,034  15,868
Non interest income  7,670  7,827  8,247  8,380
Non interest expense  23,536  23,956  23,665  22,791
 Income before income taxes  3,497  3,331  4,616  1,457
Provision for income taxes (benefit)  626  502  1,088  (96)
 Net income  $ 2,871  $ 2,829  $ 3,528  $ 1,553
Preferred stock dividends  (370)  (378)  (378)  (374)
Accretion of preferred stock discount  (95)  (94)  (92)  (91)
 Net income available to common shareholders  $ 2,406  $ 2,357  $ 3,058  $ 1,088
 Net income per share        
 basic  $ 0.11  $ 0.10  $ 0.13  $ 0.05
 diluted  $ 0.11  $ 0.10  $ 0.13  $ 0.05
             
STELLARONE CORPORATION (NASDAQ: STEL)
SEGMENT INFORMATION (UNAUDITED)
(Dollars in thousands)
             
             
At and for the Three Months Ended March 31, 2011            
             
  Commercial Mortgage  Wealth   Intersegment  
  Bank Banking Management Other Elimination Consolidated
Net interest income  $ 23,879  $ 245  $ --  $ (261)  $ --  $ 23,863
Provision for loan losses  4,500  --  --  --  --  4,500
Noninterest income  5,644  1,875  1,339  26  (1,214)  7,670
Noninterest expense  21,555  1,906  1,093  196  (1,214)  23,536
Provision for income taxes  645  64  74  (157)  --  626
Net income (loss)  $ 2,824  $ 150  $ 172  $ (275)  $ --   $ 2,871
             
Total Assets  $ 2,876,655  $ 12,613  $ 498  $ 465,231  $ (456,601)  $ 2,898,396
Average Assets  $ 2,875,903  $ 24,683  $ 166  $ 464,309  $ (454,819)  $ 2,910,242
             
             
At and for the Three Months Ended March 31, 2010            
             
  Commercial Mortgage  Wealth   Intersegment  
  Bank Banking Management Other Elimination Consolidated
Net interest income  $ 22,401  $ 355  $ --  $ (257)  $ --  $ 22,499
Provision for loan losses  6,700  --  --  --  --  6,700
Noninterest income  6,603  1,881  1,192  212  (1,073)  8,814
Noninterest expense  20,369  1,764  987  501  (1,073)  22,547
Provision for income taxes  189  142  61  (181)  --  212
Net income (loss)  $ 1,746  $ 330  $ 144  $ (366)  $ --   $ 1,854
             
Total Assets  $ 2,953,335  $ 30,829  $ 473  $ 459,417  $ (441,437)  $ 3,002,617
Average Assets  $ 2,948,033  $ 33,634  $ 197  $ 459,469  $ (442,353)  $ 2,998,983
CONTACT: Jeffrey W. Farrar
         Executive Vice President and CFO
         (434) 964-2217
         jfarrar@stellarone.com

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